18 January 1999 External T.I. 9823125 - RRIF, designated BENEFIT

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Principal Issues: Do the comments in ¶10 of IT-500R regarding RRSPs also apply to RRIFs?

Position:		The relevant comments in the IT discuss subsection 146(8.1).  Similar legislation for RRIFs is subsection 146.3(6.1).  The issue of deemed receipt is basically identical.

Reasons Provisions of the Act.

XXXXXXXXXX 982312
M. P. Sarazin
Attention: XXXXXXXXXX

January 18, 1999

Dear Sirs:

Re: Designated Benefit out of a Registered Retirement Income Fund (“RRIF”)

This is in reply to your letter dated September 3, 1998, wherein you requested comments on the applicability of certain interpretations in paragraph 10 of IT-500R, Registered Retirement Savings Plans - Death of an Annuitant, to RRIFs. In particular, you are of the view that the comments in paragraph 10 of Interpretation Bulletin IT-500R which states “It is not necessary that the estate actually pay the designated amounts to the child or grandchild” should also apply to RRIFs and its beneficiaries.

Comments

The comments contained in paragraph 10 of IT-500R regarding an election that can be made on form T2019 are in reference to subsection 146(8.1) of the Income Tax Act (the “Act”). In general terms, where subsection 146(8.1) of the Act applies, it provides that a portion of the payment out of or under a registered retirement savings plan (“RRSP”) of a deceased annuitant paid to the annuitant’s legal representative is to be taxed in the hands of the beneficiary (rather than in the annuitant’s estate) and retains its character as a refund of premiums (as if the payment had been paid directly to a beneficiary). The quote from the IT referred to above essentially confirms that a payment of the funds to the actual beneficiary is not required to achieve this result.

With regard to RRIFs, subsection 146.3(6.1) essentially functions in the same manner with regard to designated benefits in respect of a RRIF received by the legal representative of the last annuitant under the RRIF.

We would note, however, that these provisions serve to deem the recipient of the payment to be someone other than the actual recipient thereof and also serve to maintain the character of the payment for subsequent purposes, such as the application of paragraph 60(l). An election under either of these provisions will serve to include the payment in the income of a beneficiary, rather than the estate, but the requirements of paragraph 60(l) must still be met in order for the beneficiary to obtain a deduction under paragraph 60(l).

We trust that our comments will be of assistance.

Yours truly,

Paul Lynch
for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch